Six Hidden Costs Every First Time Homebuyer Should Know

By Nathan Serratore lawyer at Merovitz Potechin LLP on Monday March 17, 2025

Buying your first home is an exciting milestone, but many homebuyers are caught off guard by hidden costs. Buying your first home is an exciting milestone, but it can also come with unexpected expenses. At Merovitz Potechin LLP, we want to help you navigate these costs so you can make informed decisions and feel comfortable with your purchase. Here are some common expenses that first-time home buyers should be aware of:

1. Initial Deposit

When you make an offer on a home, you’ll typically need to pay an initial deposit. The real estate agent or a law firm typically holds this deposit in trust until closing to demonstrate your seriousness about the purchase. While this amount will be credited toward your purchase price, it’s essential to budget for it as part of your upfront costs.

2. Purchase Price Structure

Your down payment and mortgage funds typically cover the purchase price of your new home. The down payment is the portion of the purchase price you will pay personally, usually ranging from 5% to 20% depending on the mortgage type and lender requirements. The remainder will be financed through a mortgage, which you will repay over time. Understanding how this combination works is crucial for effective financial planning.

3. Land Transfer Tax

One significant cost that can catch first-time buyers off guard is the land transfer tax. This tax is calculated based on the purchase price of your home. However, many provinces including Ontario offer a first-time home buyer rebate, which can reduce this tax by up to $4,000. Be sure to check the eligibility criteria in your area to take advantage of this potential savings!

4. Legal Fees

Engaging a real estate lawyer for your home purchase is crucial. Legal fees can vary based on the complexity of your transaction. Be sure to reach out to a real estate lawyer at Merovitz Potechin LLP to discuss the range of fees that may be applicable to your purchase. These fees cover the legal services your lawyer provides, including contract review, status certificate review (for condominiums) and negotiations in order to ensure that your interests are protected throughout the process.

5. Legal Disbursements

In addition to legal fees, there are also legal disbursements (out-of-pocket expenses your lawyer incurs while handling your transaction). These may include costs for title searches, registration fees, and other administrative expenses. It’s wise to budget an additional $750 to $1000 for these costs.

6. Title Insurance

Title insurance is another important expense that many first-time home buyers overlook. This insurance protects you against potential title defects, fraud, or disputes over property ownership. The cost can range from $300 to $800 and is a requirement of most mortgage lenders. Title insurance offers peace of mind, ensuring that your investment is secure.

Conclusion

While the excitement of purchasing your first home is undeniable, being prepared for these unexpected costs can make the experience smoother and more enjoyable. At Merovitz Potechin LLP, we’re here to guide you through the legal aspects of buying your home and help you understand all the associated costs. If you have questions or need assistance, don’t hesitate to reach out!